Bank Rossii poured dollars into the currency market, with traders estimating sales of about $10 billion, and raised interest rates after the threat of Western sanctions against Russia sent the ruble to a record low.

Policy makers are stepping up efforts to shore up the ruble as investor demand for Russian assets dries up after President Vladimir Putin’s military forces took over parts of neighboring Ukraine. The ruble sank 1.8 percent against the dollar today, more than any other currency tracked by Bloomberg, while the benchmark Micex stock index plunged more than 11 percent and benchmark bond yields soared.

“So far, the panic goes on,” Dmitry Dorofeev, a money manager at BCS Financial Group in Moscow, said by e-mail. “The central bank’s decision should help support the ruble in current conditions, but it’s very negative for debt.”

Bank Rossii sold at least $10 billion to support the ruble today, according to Pavel Demetchik, a trader at ING Groep in Moscow. Dmitry Dorofeev, a money manager at BCS Financial Group, estimated sales of at least $7 billion. Bank Rossii’s press service said it won’t comment on today intervention. The size of the sales is set to be published in two days, per the regulator’s information policy. Russia’s foreign reserves have fallen $40 billion since May to $493.4 billion, according to data through Feb. 21.

The central bank surprised investors today by raising its key rate 1.5 percentage points to 7 percent today in a bid to halt the declines at the risk of deepening an economic slowdown.

While Russian troops amassed on the Crimean border, investors dumped the Russian ruble and stocks, following a weekend of tensions over Ukraine.

The selling — including an 11% plunge in the local market index — was such that the Russian central bank decided to “temporarily” hike interest rates to 7% from 5.5% on Monday, though the policy move hasn’t turned the tide.

“The decision is aimed at preventing the emergency of risks to inflation and financial stability associated with the recently observed increased levels of volatility in the financial markets,” the Central Bank of the Russian Federation said in a translated statement on its website.

The ruble had been slowly sinking against the dollar over the last few months, but the move accelerated on Monday after a weekend of escalating tensions. Western leaders threatened sanctions on Sunday and Ukraine’s leaders called the Russian troops that have massed in Crimea a “declaration of war.”

The ruble sank more than 1.8% against the dollar, to uncharted territory, and also 1.8% against the Euro. Other currencies, such as the Hungarian forint and Polish zloty declined as well, losing 0.5% and 1% against the dollar.

Russian stocks also were hammered Monday. The blue-chip MICEX index plunged 11% on Monday and is down 14% so far this year.

Ukraine said Russia’s navy ordered two of its ships in Crimea to surrender amid the worst standoff between the West and Russia since the end of the Cold War. A Russian Defense Ministry official denied the claim.

Russia’s Black Sea fleet gave the ships, located near the port of Sevastopol, until 5 a.m. to give up weapons and capitulate, Oleksiy Kirchkov, deputy commander of the Ternopil, told Ukraine’s Channel 5 by phone. The Russian official, who asked not to be named, called Ukraine’s claim disinformation. Western diplomats are seeking to calm tensions in Ukraine, with U.S. Secretary of State John Kerry arriving in Kiev today.

Disclaimer:The content on this site is provided as general information only and should not be taken as investment
advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security
or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this
site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated
with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that
you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your
investment adviser before making any investment decisions.